Borussia Dortmund — A more normal schedule

Borussia Dortmund (FRA: BVB)

Last close As at 12/07/2024

EUR3.63

0.01 (0.28%)

Market capitalisation

EUR401m

More on this equity

Research: Consumer

Borussia Dortmund — A more normal schedule

Borussia Dortmund’s Q224 results reflect the positive effects of a more normal football season versus the disruption from the FIFA World Cup in the comparative Q223 period. The reiterated financial guidance for FY24 looks well underpinned given the phasing of games and with the excitement of the final stages of the Champions League to come. The share price continues to look very attractive versus our slightly adjusted sum-of-the-parts valuation of €10.40/share and its own historical multiples.

Russell Pointon

Written by

Russell Pointon

Director of Content, Consumer and Media

Consumer

Borussia Dortmund

A more normal schedule

Q224 results

Travel and leisure

5 March 2024

Price

€3.4

Market cap

€393m

Net debt (€m) at 31 December 2023

41.2

Shares in issue

110.4m

Free float

67.2%
(includes 4.7% holding of founding football club)

Code

BVB

Primary exchange

Frankfurt

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(8.5)

(7.4)

(20.6)

Rel (local)

(12.7)

(14.2)

(30.2)

52-week high/low

€5.9

€3.4

Business description

The group operates Borussia Dortmund, a leading football club, placed second in the Bundesliga in 2022/23, DFB Super Cup winners in 2019/20 and DFB-Pokal winners in 2020/21. The club has qualified for the Champions League in 12 of the last 13 seasons.

Next event

Q324 results

10 May 2024

Analysts

Russell Pointon

+44 (0)20 3077 5700

Richard Finch

+44 (0)20 3077 5700

Borussia Dortmund is a research client of Edison Investment Research Limited

Borussia Dortmund’s Q224 results reflect the positive effects of a more normal football season versus the disruption from the FIFA World Cup in the comparative Q223 period. The reiterated financial guidance for FY24 looks well underpinned given the phasing of games and with the excitement of the final stages of the Champions League to come. The share price continues to look very attractive versus our slightly adjusted sum-of-the-parts valuation of €10.40/share and its own historical multiples.

Year end

Revenue (€m)

EBITDA (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

EV/EBITDA (x)

P/E
(x)

Yield
(%)

06/22

351.6

83.8

66.3

0.61

0.00

4.7

5.6

N/A

06/23

418.2

123.2

104.1

0.63

0.00

3.2

5.4

N/A

06/24e

433.6

113.6

103.5

0.63

0.06

3.5

5.4

1.8

06/25e

457.0

121.3

111.5

0.68

0.06

3.2

5.0

1.8

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

More games equal revenue and margin growth

More home games in Q224 (10) than in Q223 (five) drove a significant c 32% yoy increase in Borussia Dortmund’s revenue to €154.3m (Q223: €117.3m). This included growth in all revenue streams but especially for those that vary according to the number of games, like Match Operations (+72% y-o-y), TV Marketing (+40%), Merchandising (+26%) and Conference and Catering (+34%), versus Advertising (+8%). Naturally, more games lead to higher game-related expenses but EBITDA still grew at a healthier rate, c 46% y-o-y to €42.1m (Q223: €28.9m), than revenue. Free cash flow generation deteriorated a little year-on-year, mainly due to higher investment in working capital and the asset base. As a result, the net debt position increased from €17.9m at the end of Q124 to €41.2m.

FY24 guidance reiterated

Management has reiterated its FY24 guidance issued with the publication of the FY23 results, not untypical at this stage given the first team remains active in the Champions League. There is room for improvement in the first team’s Bundesliga form. At the time of writing, the team is placed fourth, just one point above the fifth-place team, and some 20 points from the leaders, Bayer Leverkusen. Fewer games in H224 versus H124, assuming no progress beyond the ‘round of 16’ in the Champions League, and the absence of net transfer income, means that FY24 guidance includes lower absolute revenue and an EBITDA loss in H224 versus H124. We maintain our estimates.

Valuation: Significant discount persists

Our asset-backed sum-of-the-parts valuation has reduced to €10.40 per share from €10.63 per share, predominantly due to the company’s higher net debt position. The prospective FY24e EV/EBITDA of 3.5x, a substantial discount to the average since FY07 of 6.7x, supports our belief the share price is significantly undervalued. The recent weakness in the share price likely reflects concerns about the first team’s current Bundesliga position.

Exhibit 1: Financial summary

€m

2020

2021

2022

2023

2024e

2025e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

370.2

334.2

351.6

418.2

433.6

457.0

Cost of Sales

(22.4)

(19.6)

(22.6)

(24.1)

(24.3)

(25.1)

Gross Profit

347.8

314.6

329.0

394.1

409.3

431.8

EBITDA

 

 

63.0

39.0

83.8

123.2

113.6

121.3

Operating profit (before amort. and excepts.)

 

 

49.1

25.3

70.5

110.3

100.0

107.3

Amortisation of acquired intangibles

(88.3)

(92.6)

(87.4)

(89.7)

(83.8)

(83.8)

Exceptionals

(3.9)

(4.8)

(9.1)

(3.6)

0.0

0.0

Reported operating profit

(43.1)

(72.1)

(26.0)

16.9

16.3

23.6

Net Interest

(3.4)

(1.1)

(4.2)

(6.1)

3.5

4.2

Joint ventures & associates (post tax)

(0.0)

0.1

0.1

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

45.6

24.3

66.3

104.1

103.5

111.5

Profit Before Tax (reported)

 

 

(46.6)

(73.2)

(30.2)

10.8

19.7

27.7

Reported tax

2.6

0.3

(1.7)

(1.2)

(3.0)

(3.0)

Profit After Tax (norm)

30.6

16.3

64.6

70.0

69.6

74.9

Profit After Tax (reported)

(44.0)

(72.8)

(31.9)

9.6

16.7

24.7

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

30.6

16.3

64.6

70.0

69.6

74.9

Net income (reported)

(44.0)

(72.8)

(31.9)

9.6

16.7

24.7

Average Number of Shares Outstanding (m)

92.0

92.0

105.6

110.4

110.4

110.4

EPS - normalised (c)

 

 

33.3

17.7

61.2

63.4

63.0

67.9

EPS - normalised fully diluted (c)

 

 

33.3

17.7

61.2

63.4

63.0

67.9

EPS - basic reported (€)

 

 

(0.48)

(0.79)

(0.30)

0.09

0.15

0.22

Dividend (€)

0.00

0.00

0.00

0.00

0.06

0.06

Revenue growth (%)

(0.0)

(9.7)

5.2

18.9

3.7

5.4

Gross Margin (%)

94.0

94.1

93.6

94.2

94.4

94.5

EBITDA Margin (%)

17.0

11.7

23.8

29.5

26.2

26.5

Normalised Operating Margin (%)

13.2

7.6

20.0

26.4

23.1

23.5

BALANCE SHEET

Fixed Assets

 

 

441.5

389.8

361.9

440.7

481.3

461.2

Intangible Assets

229.7

193.4

127.8

169.7

159.9

147.8

Tangible Assets

193.0

183.5

172.5

182.3

183.6

175.7

Investments & other

18.8

12.9

61.6

88.8

137.8

137.8

Current Assets

 

 

76.5

60.7

96.6

71.1

43.1

77.2

Stocks

6.8

6.8

4.4

5.4

5.4

5.4

Debtors

36.5

29.9

45.8

38.2

38.6

39.0

Cash & cash equivalents

3.3

1.7

10.6

4.5

(23.9)

9.8

Other

29.9

22.2

35.7

22.9

22.9

22.9

Current Liabilities

 

 

(122.6)

(163.6)

(137.3)

(161.0)

(161.9)

(169.4)

Creditors

(110.2)

(100.1)

(132.6)

(144.5)

(145.3)

(146.2)

Tax and social security

(0.0)

(0.0)

(0.0)

(1.1)

(1.1)

(1.1)

Short term borrowings

(8.0)

(56.9)

0.0

(12.8)

(12.8)

(12.8)

Finance leases

(4.4)

(4.2)

(4.6)

(2.6)

(2.6)

(2.6)

Other

0.0

(2.3)

0.0

0.0

0.0

(6.6)

Long Term Liabilities

 

 

(89.9)

(54.3)

(48.0)

(68.1)

(63.1)

(58.1)

Long term borrowings

0.0

0.0

0.0

(8.8)

(8.8)

(8.8)

Finance leases

(20.1)

(16.8)

(12.5)

(10.4)

(5.4)

(0.4)

Other long term liabilities

(69.9)

(37.5)

(35.5)

(48.9)

(48.9)

(48.9)

Net Assets

 

 

305.4

232.6

273.2

282.7

299.4

310.9

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

305.4

232.6

273.2

282.7

299.4

310.9

CASH FLOW

Operating Cash Flow

59.5

37.9

79.6

117.1

117.1

125.5

Working capital

(18.0)

(6.9)

12.7

8.9

0.5

0.5

Exceptional & other

(38.9)

(13.6)

(56.9)

(70.5)

(85.5)

(76.7)

Tax

0.3

0.0

0.0

0.0

(3.0)

(3.0)

Net operating cash flow

 

 

3.0

17.4

35.4

55.5

29.1

46.3

Capex

(6.1)

(3.4)

(1.7)

(21.4)

(15.0)

(6.0)

Net investment in intangibles

(44.6)

(58.6)

(49.4)

(55.3)

(41.0)

0.8

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

0.0

Net interest

(3.3)

(1.4)

(0.3)

(1.1)

3.5

4.2

Equity financing

0.0

0.0

86.5

0.0

0.0

0.0

Dividends

(5.5)

0.0

0.0

0.0

0.0

(6.6)

Other

(3.9)

52.5

(61.6)

16.3

(5.0)

(5.0)

Net Cash Flow

(60.6)

6.4

8.8

(6.1)

(28.4)

33.7

Opening net debt/(cash)

 

 

(44.4)

29.1

76.2

6.6

30.1

58.5

Other non-cash movements

(12.9)

(53.6)

60.8

(17.4)

0.0

0.0

Closing net debt/(cash)

 

 

29.1

76.2

6.6

30.1

58.5

24.8

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Borussia Dortmund and prepared and issued by Edison, in consideration of a fee payable by Borussia Dortmund. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

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New Zealand

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United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom


General disclaimer and copyright

This report has been commissioned by Borussia Dortmund and prepared and issued by Edison, in consideration of a fee payable by Borussia Dortmund. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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